Investing in Acsion (JSE:ACS) three years ago would have delivered you a 52% gain
By buying an index fund, investors can approximate the average market return. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the Acsion Limited (JSE:ACS) share price is up 36% in the last three years, clearly besting the market decline of around 1.8% (not including dividends). On the other hand, the returns haven’t been quite so good recently, with shareholders up just 9.3% , including dividends .
So let’s investigate and see if the longer term performance of the company has been in line with the underlying business’ progress.
View our latest analysis for Acsion
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During three years of share price growth, Acsion achieved compound earnings per share growth of 49% per year. The average annual share price increase of 11% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time. We’d venture the lowish P/E ratio of 1.93 also reflects the negative sentiment around the stock.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. This free interactive report on Acsion’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Acsion’s TSR for the last 3 years was 52%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
It’s good to see that Acsion has rewarded shareholders with a total shareholder return of 9.3% in the last twelve months. That’s including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 3% per year), it would seem that the stock’s performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we’ve identified 3 warning signs for Acsion (1 is concerning) that you should be aware of.
Acsion is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on South African exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.